Environmental Violation Events And Firm Liquidity

Due to its severity and universality,environmental violation events have aroused wide concern in recent years.Based on stakeholder theory,signaling theory and the DID method,we perform an empirical study on the relationship between environmental violation events and firm liquidity,and the modulating effect of media coverage and political connection.Using a sample of 176 Chinese A-share listed companies over the period of 2011-2015,it is found that environmental violation events have a significant negative impact on the violation-involved company's receipt of trade credit,ratio of the unsecured part in short-term loans and ratio of the unsecured part in long-term loans.Furthermore,media coverage will enlarge the impact of these violations on firm's liquidity,especially firm's ratio of the unsecured part in loans.However,there is no evidence that political connection has an alleviating effect on the firm liquidity of the violation-involved company after the disclosure of environmental violation events.